What might I need a business loan for?

If you’re running a business, you’ll already know the value of the right funding at the right time. It can give you the headroom to invest or adapt, from upgrading machinery to seizing an unexpected opportunity to scale your business.

Although it can be tempting to use a personal loan for business purposes, it can come with downsides. You may miss out on tax-deductible interest, risk your personal credit record, and struggle to borrow the amount you need. A business loan, on the other hand, is designed to help your company grow while keeping your finances separate and your borrowing aligned with business goals.

Looking to reduce costs while building a more sustainable business? Green business loans are tailored for eco-conscious upgrades like low-emission vehicles, renewable energy installations, or energy-efficient equipment. Going green could also unlock preferential rates and long-term savings.

Are you eligible for a business loan?

To get a business loan, you'll usually need to tick a few basic boxes. This is because lenders want to see that your business is real, active, and has a decent plan for how you'll use the money. Some may have extra rules, depending on how much you're borrowing or what you're using it for.

Here’s what one leading provider of UK business loans requires, to give you an idea of the boxes you may need to tick to apply. You should:

  • Be at least 18 years old.

  • Borrow at least £1,000.

  • Borrow for business reasons (not personal reasons).

  • Be a sole trader, partner or director.

  • Be authorised to borrow on behalf of the business.

  • Show how your business will repay the loan.

  • Provide security for your business loan (in some cases).

Some lenders might also look at how long you’ve been trading or ask for accounts or forecasts, especially if your business is still new.

Bear in mind that, while getting a business loan can be straightforward, brand-new businesses might have to provide a little more evidence of affordability since there's no business account history to back things up. Still, with a solid plan, it could be just the leg-up your business needs.

How do business loans work?

Business loans are a way for companies to borrow money to support cash flow, invest in growth or cover one-off costs. You borrow a lump sum and repay it over an agreed period, with interest.

You will need to choose between a secured or unsecured business loan. A secured loan means you'll need to offer assets – like property or equipment – as collateral, which can help you access larger amounts or better rates. In contrast, unsecured loans don’t require collateral, but you may need a strong credit history and you could be limited in how much you can borrow.

When it comes to deciding which interest rate option to go for on your business loan, you'll need to choose between fixed and variable deals:

  • Fixed rate business loans: Your interest rate stays the same for the fixed term, so your monthly repayments won’t budge. Handy for budgeting and avoiding surprises.

  • Variable rate business loans: Variable rates can go up or down, as they typically follow the Bank of England’s base rate. If the rate drops, you could save on interest, but if it rises, your repayments could go up too.

Which one’s best for you depends on how much certainty you want and how comfortable you are with potential changes in repayments. Either way, repayments are usually made monthly.

How much can I borrow with a business loan?

How much you can borrow with a business loan depends on your financial situation and what the money’s for. We took a look at some of the leading providers of business loans to give you an idea of what’s available.

One leading provider offers small business loans from £1,000 up to £100,000, which is often enough cash for smaller businesses. Or, for bigger projects, the same lender can offer loans with no upper limit on a variable interest rate, or up to £10m on a fixed interest rate.

Another well-known UK bank advertises business loans of between £1,000 and £50,000, and may lend more.

Lenders will look at things like your trading history, turnover, creditworthiness and ability to repay when deciding how much you can borrow. Some lenders may require a personal, director or member's guarantee before they’ll approve the loan.

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Page updated on 15th October 2025, Reviewed by Richard Groom